Introduction

On November 7, Massive Interactive, a London-based OTT software provider, announced that it had signed an agreement to be acquired by Deltatre, a global provider of sports media services and technology in a transaction worth up to $127m. This transaction is an attempt by Deltratre to enter the entertainment sector, as well as to become the world largest independent provider of services related to live streaming and video on demand technology. After the acquisition, Massive will operate as a division of Deltatre and the combined entity will have 18 offices worldwide, and around 1000 employees. The transaction is expected to be completed by the end of November 2018.

About Deltatre

Deltratre s.p.a. is a sports media company, focused on delivering services related to sports video streaming and digital media. It is a private company established in 1986 in Turin, Italy. It is currently owned by Bruin Sports Capital, a private equity firm that invests in sports and lifestyle industries. The company has a global presence, with offices in Turin, London, Paris, New York, Los Angeles, Singapore and Tokyo.

Deltratre operations are related to over the top media (OTT) and live streaming. Deltratre delivers multi-platform sports coverage and focuses on both onstage and backstage solutions. Onstage services refer to solutions designed for viewers on venue and on linear TV, and comprise “Matrics” a system that supports data gathering and presentation. For instance, it enables to create graphics within seconds of live action. Backstage services, on the other hand, refer to streamlined sport event management as Deltratre supports organizes with logistical issues related to sports events. In this way, Deltratre cooperates not only with media companies but also with sports federations and leagues.

Product wise, through Amplify, its internally developed and highly sophisticated end to end OTT platform, Deltratre was able to extend broadcasting to the digital space very successfully. Amplify has been used among others by the ATP’s Tennis TV, NFL Game Pass Europe, Juventus Pass or FINA TV. Another successful application that the company has developed is called ‘Diva player’ which is a sport video application and includes functionalities such as live synchronized data and interactive overlays. It has been implemented to enhance the OTT services during well-known events such as the FIFA World Cup and the Olympic Games.

About Massive Interactive

Massive Interactive Inc. is a global technology company focused on providing B2B software solutions. Massive Interacted was established in 1996 and is headquartered in London, with offices in New York, Sydney and Prague. In 2015, it raised around $2.9m in venture capital financing, and was later incorporated in December 2006.

Massive Interactive targets broadcasters and content distributors, who provide their services using OTT. It specializes in software and design of end-to-end video platforms. It caters to Media and Telecommunication companies and more generally content distributors worldwide, including AT&T, BBC, SKY, Sony Pictures Television and Viacom’s Channel 5. Massive Interactive also delivers solutions for inflight entertainment and cooperates with Emirates, Virgin Atlantic or Singapore Airlines.

One of the main product in Massive portfolio is Multi-Screen Development Kit, which allows to set up applications across a variety of devices. Massive also provides Axis, an end user experience (UX) interface server. This platform has been designed to provide end customers with the right content, advertisement and promotion at relevant times and on the best device, as it integrates all third-party systems workflows.

Industry Overview

Over-the-top (OTT) video refers to video transmitted via the Internet, bypassing traditional cable/linear distribution. The profound popularity of the OTT video has been disrupting the television industry. Proliferating hybrid models such as those combining Subscription VOD (Video on Demand) and Advertising VOD are accelerating the media landscape shift to OTT. 56% of US households now prefer to watch their media content on digital streaming platforms over traditional cable television services.

At a time when Netflix is better known than BBC One to the average teenager in the UK, it is unsurprising that the last media segment that used to be, up until quite recently, dominated by an audience that prefers appointment-viewing – sports media – is witnessing the shift. The acknowledgement of this shift has been quite striking as well. For instance, Disney, through its recently acquired Direct-to-Customer (D2C) streaming technology and marketing services BAMTech, has launched ESPN+ – an ESPN-branded multi-sport video streaming service. Turner Sports, the sports broadcast division of Turner Broadcasting system, recently rolled out its subscription video streaming service B/R Live through its sports website Bleacher Report, which is a competitor of ESPN.

Additionally, OTT giants such as Facebook and Amazon Prime Video are also strategising to tap into the market of sports streaming. With its belief in aggregating sports fans, and encouraging real-time interactions among the audiences through FB live streaming, Facebook possibly aims to enhance the sports-viewing experience. It is also interesting to note that sports organisations are turning to social media to enhance its reach. For example, Real Madrid, upon reaching 100m likes on its FB page, launched Hala Madrid on Facebook Watch, an 8-part series of broadcast-quality films shot on GoPro cameras. The series had 96m people on the platform, reaching 30m+ views. It is even more interesting to note that Facebook Watch was launched only in the US, where Real Madrid has less than 7% of its total FB fan base.

The future of sport viewing has always been influenced by the question of reach versus revenue, and OTT sports streaming may be the answer to augment reach, revenue and engagement.

Deal Structure

On November 7, 2018, Deltatre announced its takeover of British software company Massive Interactive. Deltatre will acquire Massive and its subsidiaries in a deal worth up to $127m, with a combination of cash and earnout provisions. The transaction includes the purchase of the additional outstanding equity interests of one of Massive’s subsidiaries under a separate equity purchase agreement.

The aggregate consideration payable at the closing by Deltatre for the equity of Massive and its subsidiaries is approximately $76.6m – $47.9m of which is equity amount payable in the Merger of Massive and $28.7m the payable to other holders of equity of the subsidiary. The acquisition was financed by U.S. based private equity firm Bruin without raising capital from outside. The terms and conditions of the definitive merger agreement state that Massive’s common stockholders will receive $0.22128 in cash per share. Massive’s preferred stockholders will receive $0.001 per share of preferred stock upon the closing of the deal.

Furthermore, once the transaction is closed, stockholders of Massive will be eligible to receive a contingent earnout payment with a maximum aggregate value of $35m. The payment of the earnout is subject to Massive and its subsidiaries achieving certain financial targets in the three calendar years following closing of the acquisition, subject to acceleration or reduction in certain circumstances.

Deal rationale

The shift towards over-the-top (OTT) content has been remarkable in recent years, forcing companies to offer individuals customized viewing experiences and highly engaging content. With this acquisition, Deltatre wishes to position itself at the forefront of the OTT market, by leveraging Massive Interactive’s video-streaming capabilities and expertise to accelerate the deployment of new services. Senior management is also convinced that this procedure will be highly scalable in the future, with the primary aim of reaching new customers, and boost the entity’s profitability.

Furthermore, the deal allows the firm to gain a stronger footprint in Asia and in the South Pacific, as well as expand into the entertainment sector. Massive Interactive will operate as a division of Deltatre, creating the largest independent OTT provider. In particular, Massive Interactive’s UX management console, Axis, which is currently used by BBC Worldwide, Bell Media, Sony Pictures Television and many others, will prove invaluable to Deltatre’s OTT platform. Axis helps run various sports and entertainment services, and with the combination of Deltatre’s Amplify system, will allow the firm to complete the “end to end OTT product street”. The combined entity, valued at approximately $1bn, would thus be able to effectively compete with the giants Disney and Endeavor, who have previously dominated the industry. Deltatre’s CEO and Co-Founder, Giampiero Rinaudo, was likewise impressed by the cohesive culture of Massive Interactive and believes that the integration process will run smoothly.

The transaction was also motivated by the company’s desire to progressively erode the market share of conventional broadcasters, who have been struggling to address the habit of millennials to watch movies and sports on mobiles devices and laptops. Over the last year, key competitors have already recognized and positioned themselves at the vanguard of this movement. For example, Disney acquired BAMTech, the streaming giant of US sports, for $3.75bn, and Endeavor purchased NeuLion, a streaming company, for $250m.

Market reaction

Following the announcement, Massive Interactive’s shares surged from $0.15 to $0.222 on 8 November, a 48% increase.

Advisors

Deltatre appointed HSBC as financial advisor, while Gibson Dunn assisted the company in all legal matters related to the deal. On the other hand, Massive Interactive was advised by Raymond James over all financial considerations, with DLA Piper acting as legal advisor. Both companies have targeted a closing date of 20 November, subject to regulatory approvals.

 


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